Brookfield makes offer to take Brookfield Property Partners private

TORONTO — Brookfield Asset Management Inc. has offered US$5.9 billion to buy the remaining stake in Brookfield Property Partners LP that it does not already own.

The asset management company is offering US$16.50 per unit. Shares of Brookfield Property Partners rose more than 18 per cent to as much as US$17.14 apiece on the Nasdaq by midday Monday on the heels of the news. In Toronto, the property group’s shares saw a similar surge of nearly 18 per cent on Monday morning, while shares of Brookfield Asset Management fell about four per cent.

Under the offer, Brookfield Property unitholders will have the option to receive payment in cash, Brookfield shares or Brookfield Property Partners preferred units, within certain limits. The maximum cash available under the proposal is US$2.95 billion.

Brookfield Asset Management chief financial officer Nick Goodman says the deal would give Brookfield greater flexibility in operating the portfolio and realizing the value of its high-quality assets. Brookfield Property Partners says it has established a committee of independent directors to review and consider the proposal.

The move comes in a time of flux for two of Brookfield Property Partners’ key real estate sectors, offices and malls. Brookfield Property Partners owns or operates 139 office buildings across the world and 100 of the top 500 U.S. malls. Both office work and retail have moved more operations online as the COVID-19 pandemic limited occupancy in physical locations, although chief executive Brian Kingston has expressed optimism in the past year.

“Even companies that have publicly promoted a more flexible work-from-home policy have not scaled back on their own long-term office requirements, opting instead to take advantage of the current disruption to secure even more space for their businesses,” Kingston said in a November call with financial analysts discussing Brookfield Property Partners’ third-quarter earnings.

“A large number of tech and financial services tenants have recently reconfirmed their commitment to either maintain or grow their office footprint in New York City.”

Despite the upbeat assessment of the office real estate market, Kingston also said Brookfield Property was building up credit loss reserves over the summer amid declining mall revenues.

Brookfield Asset Management recently teamed up with Simon Property Group to buy mall retailer JCPenney from bankruptcy. Although Brookfield Property Partners will have no investment in the transaction, the property group is the landlord to 99 JCPenney locations, executives said on the November conference call.

“It’s an important transaction for (Brookfield Property Partners) as the landlord to this tenant,” Kingston said in the call.

This report by The Canadian Press was first published Jan. 4, 2021.

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